A major characteristic of financial markets is information asymmetry. To combat its problems principals can use screening. That is, they can offer the clients a menu of contracts and infer their risk level from their choices. If the pattern of choices that clients with different risk level make differs, there is self-selection of clients and screening occurs. We conduct an experiment to address an important question for such settings?does the framing of the offered menu of contracts interfere with the self-selection of clients? The answer is yes. In fact, subjects? choices shift when the same (positive) outcomes of the same menu of contracts are presented in two different frames. Since both frames differ in the ?perceived? reference-point, we propose a theoretical approach that initially follows Prospect Theory to explain our results. Subjects exhibit loss aversion in their perception and assessment of the positive outcomes below the reference-point, and self-selection fails to occur.

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